Rolls Building
Fetter Lane, London, EC4A 1NL
Before :
THE HON MR JUSTICE ARNOLD
Between :
(1) SONY/ATV MUSIC PUBLISHING LLC (2) SONY/ATV MUSIC PUBLISHING (UK) LIMITED | Claimants |
- and - | |
(1) WPMC LIMITED (2) IAMBIC MEDIA LIMITED (IN LIQUIDATION) | Defendants |
Ian Mill QC and Andrew Scott (instructed by Forbes Anderson Free) for the Claimants
Alastair Wilson QC and Stephanie Wickenden (instructed by McFaddens LLP) for the First Defendant
Hearing dates: 15-16 and 18-19 June 2015
Judgment
MR JUSTICE ARNOLD :
Contents
Topic | Paras |
Introduction | 1-8 |
The Concert | 9-10 |
The Concert Video | 11-13 |
The Copyright Works | 14-15 |
The Documentary | 16-19 |
Factual background | 20-77 |
Issue 1: Collateral contract | 78-91 |
WPMC’s primary case | 79-82 |
WPMC’s alternative case | 83-90 |
Assignment of the benefit of the contract | 91 |
Issue 2: Proprietary estoppel | 92-95 |
Issue 3: Fair Use | 96-123 |
Principles | 96-109 |
Factor (1) | 102-103 |
Factor (2) | 104 |
Factor (3) | 105-108 |
Factor (4) | 109 |
Assessment | 110-123 |
Factor (1) | 111-113 |
Factor (2) | 114 |
Factor (3) | 115-116 |
Factor (4) | 117-121 |
Overall assessment | 122-123 |
Conclusion | 124 |
Introduction
On 11 February 1964 the Beatles gave their first concert in the United States of America at the Coliseum in Washington DC (“the Concert”). They performed 12 songs. The Concert was videotaped for subsequent exhibition at cinemas and theatres across the USA (“the Concert Video”). In 2009 the Second Defendant (“Iambic”) acquired a copy of the (or at least a) master tape of the Concert Video and set about making a documentary about the Concert entitled The Beatles: The Lost Concert (“the Documentary”). Subsequently the rights to the tape of the Concert Video were transferred to the First Defendant (“WPMC”). The First Claimant (“SATV US”) is (subject to the small qualification noted below) the owner of the worldwide copyrights in eight of the songs performed during the Concert (“the Copyright Works”) and the Second Claimant (“SATV UK”) is the exclusive United Kingdom licensee of the Copyright Works. Between late 2009 and October 2010 Iambic negotiated with the Claimants (collectively “SATV”) for a synchronisation licence in respect of the Copyright Works (i.e. a licence to reproduce and otherwise exploit the Copyright Works as part of the soundtrack to the Documentary). No synchronisation licence was executed as a result of these negotiations.
In April 2012 it came to SATV’s attention that the Documentary was being promoted by means of a website located at www.lostbeatlesconcert.com (“the Website”) and a trailer (“the Trailer”). Following correspondence, SATV commenced these proceedings and applied for an interim injunction. Given that the Documentary had been made in the UK, but the Defendants’ principal target market was the USA, SATV brought claims for infringement of both the UK and US copyrights in the Copyright Works. The claim for infringement of the US copyrights was brought pursuant to the decision of the Supreme Court in Lucasfilm Ltd v Ainsworth [2011] UKSC 39, [2012] 1 AC 208. On 15 May 2012 David Richards J made an order by consent recording an undertaking by the Defendants not to exploit the Documentary except on 28 days’ notice to SATV and a cross-undertaking in damages by SATV. WPMC has not to date given 28 days’ notice. It may be that, in reality, this dispute is now about compensation for what happened in 2012; but that does not affect the issues I have to decide.
Iambic and WPMC are both English companies. At all material times prior to 17 September 2012, both companies were wholly owned by Christopher Hunt, who was also a director of both of them. Iambic was wound up on 17 September 2012. On 9 January 2013 Mr Hunt was made bankrupt. At around the same time Mr Hunt was replaced as director of WPMC by David Bailey, who also acquired a majority shareholding in WPMC. On 14 January 2014 SATV entered into a deed of settlement with Iambic and its liquidator under which Iambic assigned to SATV all its rights in the Concert Video and the Documentary. Accordingly, SATV have not applied to lift the automatic stay of the claim against Iambic as a result of its being in liquidation.
WPMC does not dispute that it has (acting by a contractor, Prime Focus, which carried out the editing of the Documentary) reproduced the whole of each of the Copyright Works on the soundtrack of the Documentary in the UK, and hence committed acts which infringe the UK copyrights in the Copyright Works if it does not have SATV’s licence. Nor does WPMC dispute that it threatens and intends to exploit (or at least authorise the exploitation of) the Documentary in the USA by means of an agreement with Ace Arts LLC (“Ace”) or that it has (again acting by Prime Focus) transmitted at least one copy of the Documentary to the USA for that purpose.
There are three issues to be determined. The first is whether a collateral contract to grant a synchronisation licence was concluded during the negotiations. The second is whether, if no collateral contract was concluded, SATV are estopped from denying that they have granted a synchronisation licence. It is common ground that the first and second issues are to be determined applying English law. The third issue is whether the exploitation of the Documentary in the USA would be an infringement of the US copyrights in the Copyright Works. WPMC contends that it would not, because it amounts to fair use. This issue is to be determined applying US copyright law.
It should be noted before proceeding further that on 6 June 2013 Ace brought proceedings in respect of the Documentary against SATV US and Apple Corps Ltd (“Apple”) in the US District Court for the Central District of California Western Division. Ace subsequently discontinued those proceedings and re-filed them in the US District Court for the Southern District of New York. In those proceedings Ace seeks a declaration that neither SATV US nor Apple have any rights which would be infringed by commercial exploitation of the Documentary in the USA. In particular, Ace contends that exploitation of the Documentary would not infringe the US copyrights in the Copyright Works because it amounts to fair use. Thus the issue of fair use has been raised in both sets of proceedings. In those circumstances I approach the issue with some diffidence; but that does not absolve me from the responsibility of deciding it.
The only witness of fact who gave evidence before me was Mr Hunt. Mr Hunt is a television producer and media executive of almost 30 years’ experience. Much of his experience is in the field of music films and television productions, and he has long experience of musical copyright clearance. Although he is not a lawyer, during the course of his career he has acquired some knowledge of some areas of the law, particularly contract and copyright law. Counsel for SATV submitted that Mr Hunt was not a reliable witness. In my assessment Mr Hunt was an essentially truthful witness, but his evidence did suffer from two flaws. First, as he readily accepted, he had understandable difficulty recollecting precise details of events which took place five to six years ago. Secondly, I consider that some of his evidence was coloured by his awareness of the legal issues. In any event, so far as the first two issues identified above are concerned, what matters are the communications that passed between Mr Hunt and SATV, mainly by email, which must be objectively assessed.
In addition, I heard evidence from two experts on US copyright law. SATV’s expert witness was William Hart, an attorney who has specialised in copyright since he was admitted in 1982 and who was recently Co-Chair of the copyright practice at Proskauer Rose LLP. He is also an Adjunct Professor at Brooklyn Law School in New York City. WPMC’s expert was Prof Peter Jaszi, who is Professor of Law at the Washington College of Law, American University, Washington DC and Director of the Glushko-Samuelson Intellectual Property Law Clinic. He is also an attorney and a Trustee of the Copyright Society of the USA and a member of the Editorial Board of its Journal. Among other publications, he is the author of “When Works Collide: Derivative Motion Pictures, Underlying Rights and the Public Interest” 28 UCLA Law Review 715 (1981) and “Copyright, Fair Use and Motion Pictures” 2007 Utah Law Review 715. He is also the co-author of the Documentary Filmmakers’ Statement of Best Practices on Fair Uses (November 2005). Both experts had prepared expert reports which, in addition to setting out the relevant principles of US law, had inadmissibly sought to apply those principles to the facts of the case. At my suggestion, it was agreed that both experts should give evidence by videolink. In addition, I guillotined the cross-examinations to one hour each. I am grateful to both experts for their assistance, but their oral evidence added little to my understanding of the principles which are set out in the cases and other materials identified in their reports.
The Concert
It is relevant to note that the Concert took place less than three months after the assassination of President Kennedy and shortly after the Beatles’ first appearance on the Ed Sullivan Show on US television. The arrival of the Beatles in New York, their appearance on the Ed Sullivan Show and the Concert marked the start of “Beatlemania” in the USA.
The songs performed by the Beatles during the Concert were as follows:
“Roll Over Beethoven”;
“From Me To You”;
“I Saw Her Standing There”;
“This Boy”;
“All My Loving”;
“I Wanna Be Your Man”;
“Please Please Me”;
“Till There Was You”;
“She Loves You”;
“I Want To Hold Your Hand”;
“Twist And Shout”;
“Long Tall Sally”.
The Concert Video
The Concert Video lasts approximately 35 minutes. It is a professionally filmed and edited production. According to the credits on the Concert Video, it was “presented by” National General Corp (“NGC”), “produced by” Concerts, Inc. and “presented by the courtesy of” Brian Epstein (the Beatles’ manager at the time) and NEMS Enterprises Ltd (his company). It appears that one or more master tapes of the Concert Video were made on two-inch “quad” videotape.
The Concert Video was shown, as part of a 90 minute package together with separately-recorded performances by the Beach Boys and Lesley Gore, by means of closed-circuit television broadcasts to cinemas and theatres across the USA over two weekends in March 1964. This exercise appears to have been commercially very successful. What happened to the master tape(s) after that is unclear. It appears, however, that in 1987 James Karnbach purchased a quad master tape from Malcolm Klein, whose uncle Eugene Klein had been Chairman of NGC in 1964. Mr Karnbach made a Beta cam copy of the quad master tape. In 1995 Mr Karnbach sold the quad master tape to Henry Pipkin. This was auctioned in 2005. Either then or subsequently, it was acquired by Apple. In 2009 Mr Karnbach sold the Beta cam copy to Lawrence and Martin Marion, from whose company The Concert Magic Company (“CMC”) Iambic acquired the right to incorporate the Concert Video in the Documentary (see below).
It should be noted that it does not appear that anyone claims copyright in the Concert Video. WPMC and Ace contend that the Concert Video is in the public domain under US copyright law.
The Copyright Works
The Copyright Works relied on by SATV are the musical and literary works comprised in the following songs:
“From Me To You”;
“I Saw Her Standing There”;
“This Boy”;
“All My Loving”;
“I Wanna Be Your Man”;
“She Loves You”;
“I Want To Hold Your Hand”;
“Twist And Shout”.
These are all compositions credited to Lennon and McCartney except for “Twist And Shout”, which is credited to Berns and Medley. SATV US is the sole owner of the copyrights, except that in the case of “Twist And Shout” it only owns 66.6% of the US copyrights. No point has been taken on the non-joinder of the other owner.
The Documentary
The Documentary is approximately 95 minutes long. It is a skilfully-edited synthesis of three main types of material: the Concert Video; other archive films and still photographs; and newly-filmed interviews with a number of interviewees. The interviewees fall into three categories:
Cultural historians or commentators. In this category are the well-known journalist Paul Gambaccini and Bruce Spizer, who is credited as a Beatles historian and author.
Participants in the events of 1964. In this category there are the following: Tommy Roe (a singer and songwriter), Louise Harrison (George Harrison’s sister), Sid Bernstein (a promoter), Larry Kane (a broadcaster), Ron Oberman (a journalist), Barry Silverman (a radio presenter), Ed Rudy (a broadcaster), Maureen Cleave (an English journalist), Jamie Hiegel Leier (a fan who attended the Concert), Mike Mitchell (a photographer), Naomi Banks (a local resident), John Lynne (the son of the owner of the Coliseum) and Beverley Rubin (another fan).
Other musicians. In this category are Chuck Berry, Steve Tyler and Joe Perry of Aerosmith, Mark Ronson, Duffy and Albert Hammond Jr and Nick Valensi of the Strokes.
The narrative of the Documentary may be summarised as follows. It begins with the Coliseum in 2010, which is derelict. It introduces the Concert. It explains the origins of Beatlemania in the UK. It relates how Mr Bernstein agreed with Mr Epstein to promote the Concert. It explains that the Beatles initially struggled to break into the US market with smaller record companies, before signing to Capitol Records. It explains that the Beatles initially struggled to get airplay on US radio stations, and how this was overcome. It discusses the ways in which the Beatles were promoted prior to their arrival in the USA. It relates the attention which the Beatles received when departing from London and arriving in New York, and how this became a news story and not merely an entertainment story. It explains the impact made by the Beatles’ hairstyles and clothes. It discusses the bland state of US pop music prior to the advent of the Beatles, and how their music transformed the situation. It relates what happened when the Beatles arrived at Union Station in Washington DC. It considers the state of the Coliseum in 1964 and in 2010. It relates how the Beatles gave a day’s worth of interviews to broadcasters and journalists at the Plaza Hotel, and how the Beatles’ spontaneity and wit on that and other occasions contributed to their popularity. It explains that the Concert was attended by between 8,000 and 9,000 fans, which was a much bigger audience than the Beatles had previously played to. It considers the Beatles’ (and particularly Ringo Starr’s) status as sex symbols. It explains the crude nature of the technology used at the Concert. It explains that the country was looking for something positive following the assassination of President Kennedy, and how the Beatles fitted the bill. It relates how, during the Concert, fans threw jelly beans onto the stage (mistakenly thinking that they were the same thing as jelly babies, which the Beatles had been reported as saying they were fond of). It relates how one of the fans picked up the Beatles’ set list at the end of the Concert, and kept it as a souvenir, and how the Beatles had devised the set list at their hotel. It relates that the Beatles attended a reception at the British Embassy after the Concert, and that during the reception another fan cut a lock of Ringo Starr’s hair, which she kept as a souvenir. Finally, it briefly covers the impact of the Beatles in the years following the Concert, and in particular their impact on the peace movement. It ends with the Coliseum in 2010.
Interspersed with this narrative are two types of interludes. The first type consists of sections of the Concert Video. The second type consists of interviewees, and in particular the contemporary musicians, being filmed watching the Concert Video and making comments. The comments of the interviewees are, in the main, general ones about the Beatles, their musical talents and their impact.
It is important to appreciate that the Documentary incorporates almost the whole of the Concert Video, albeit broken up into six sections as follows: (i) “Roll Over Beethoven”, “From Me To You” and “I Saw Her Standing There”, (ii) “This Boy” and “All My Loving”, (iii) “I Wanna Be Your Man” and “Please Please Me”, (iv) “Till There Was You” and “She Loves You”, (v) “I Wanna Hold You Hand” and “Twist And Shout” and (vi) “Long Tall Sally”. Thus the Documentary incorporates complete performances of each of the Copyright Works. In addition to the complete performances of the Copyright Works, the Documentary also repeatedly incorporates parts of the performances of the Copyright Works in the soundtrack at other points. The extent of use of the Copyright Works is summarised in the following table, which is derived from an analysis of a cue sheet supplied by Iambic to SATV on 27 April 2012. The totals in the right hand column add up to 41 minutes and 59 seconds.
Total length of song (per cue sheet) | Number of times the song appears in the Documentary (in whole or in part) | Total time the song appears in the Documentary | |
She Loves You | 00:02:13 | 6 | 00:05:23 |
All My Loving | 00:02:01 | 6 | 00:07:00 |
I Wanna Hold Your Hand | 00:02:19 | 3 | 00:05:02 |
This Boy | 00:02:14 | 4 | 00:04:42 |
From Me To You | 00:01:48 | 6 | 00:03:47 |
I Saw Her Standing There | 00:02:35 | 7 | 00:06:06 |
I Wanna Be Your Man | 00:02:08 | 2 | 00:04:13 |
Twist And Shout | 00:02:28 | 7 | 00:05:46 |
Factual background
On 6 July 2009 Iambic entered into an agreement with CMC under which CMC granted Iambic the exclusive right to include the Concert Video in the Documentary on terms that all sums received by either party from the exploitation of either the Concert Video or the Documentary should be divided equally between the parties.
On 22 October 2009 Mr Hunt and a colleague from Iambic met the Managing Director Jeff Jones and another representative from Apple at Apple’s offices in London at which the Iambic representatives showed the Apple representatives the Concert Video and tried to persuade Apple to endorse the projected Documentary in return for a commercial fee. According to a note of the meeting which Mr Hunt prepared from memory subsequently, Mr Jones indicated that the Documentary might not fit into Apple’s release schedule. There was then some discussion of what rights Apple might have in respect of the materials to be incorporated into the Documentary. According to Mr Hunt’s note:
“Finally JJ said they could ask Sony/ATV not to license the music copyright, and that this would actually be how they’d stop us if they wanted to. CH made no comment on this (having met the MD of Sony/ATV the day before and received a verbal assurance that they would not accede to any such request from Apple).”
Mr Hunt did not refer to any meeting with SATV’s Managing Director on 21 October 2009 in his evidence, and no reliance is placed by WPMC on any assurance which may have been given on that occasion.
On 26 October 2009 Mr Hunt sent Mr Jones and his colleague an email suggesting that a “one-week limited release next Spring … might be an attractive extra revenue generator for Apple”. On 3 November 2009 Mr Jones replied in a letter stating:
“We do not wish there to be any exploitation of the material you showed us in any medium. Please convey to your principals in the clearest possible terms that exploitation by them should not take place, and they should not be formulating any plans. I would appreciate a written assurance by them that nothing will be done without Apple’s consent. I really do not want to have to start involving lawyers in this.”
On 27 November 2009 Mr Hunt sent Rakesh Sanghvi of SATV UK an email, following a meeting between them the previous week, in which Mr Hunt requested a synchronisation licence for the inclusion of the Copyright Works in the proposed Documentary. By an email in reply dated 30 November 2009, Mr Sanghvi asked Mr Hunt to discuss the project with Karina Masters, SATV’s Head of Synchronisation and Marketing, who was copied into the reply.
On 3 December 2009 Ms Masters sent Mr Hunt an email in which she provided “ballpark quotes” in response to Mr Hunt’s request. Her email was headed “Subject to contract & approval Use subject to Lennon & McCartney Restrictions as set out below”. The email explained that “strict restrictions apply for any Lennon/McCartney use in synchronisation projects: Sony/ATV has full and final approval of any re-record (if applicable) and final film(s)”.It added that “you will need to obtain written approval from Apple that they approve of the project and are happy with any references/visual representations of the Beatles etc”.
Mr Hunt replied in an email dated 14 December 2009 headed “SUBJECT TO CONTRACT AND APPROVAL”. In this email, Mr Hunt objected to the prices that Ms Masters had quoted and made various counterproposals. He did not disclose that the project had encountered resistance from Apple, however.
Ms Masters responded in an email dated 23 December 2009 headed “Subject to contract & approval/Quote valid for Thirty (30) days from today’s date”. She explained that SATV’s fees took into account the “valued history and prestige” of the catalogue, but nevertheless proposed amended quotations. She also said that “As per my previous email, all quotes are subject to approval and based on the restrictions set out below. We will need any approvals you may obtain from Apple in writing prior to moving forward with the project”. Ms Masters concluded by explaining that she would be out of the office until 20 January 2010, but had copied in both Mr Sanghvi and Chris Graves who could assist in the interim.
On 4 January 2010 Mr Hunt replied by email to Messrs Sanghvi and Graves, making various counterproposals and requesting an early response. After some exchanges between Mr Graves and Mr Hunt, Mr Graves sent Mr Hunt an email dated 22 January 2010 containing further quotations. Again, this was expressed to be “Subject to contract & approval / Quote valid for Thirty (30) days from today’s date”.Mr Graves also reiterated that “all quotes are subject to approval and based on restrictions as set out below” and that Apple’s approval was required to progress the project.
After further exchanges between Mr Hunt and Mr Graves, Ms Masters sent Mr Hunt an email dated 29January 2010 headed “Subject to contract & approval”. She explained that Sony/ATV’s position remained as set out in Mr Graves’ email dated 22 January 2010. She went on:
“… we are unable to move forward with any next steps (on the basis that our quotes are acceptable to yourself) until we have viewed a copy of the documentary and more importantly, that we have been advised that Apple have provided their approval on the project which I understand had been discussed in your meeting [with Mr Sanghvi]. This is a condition of any licences we grant for this catalogue where there are certain visual and/or vocal Artist elements embodied in a project. As I advised in our conversation, the onus is on the party requesting the use of the copyrights to obtain this from Apple, so we would need this from you prior to proceeding further.”
Mr Hunt replied in an email dated 29 January 2010, again headed “SUBJECT TO CONTRACT”, which was copied to Mr Sanghvi among others. He said that he could not accept Ms Masters’ 22 January 2010 quote, but instead would accept her 23 December 2009 quote for worldwide use for limited theatrical release, television and DVD, which (as he put it) “nets [SATV] a cool £520,000”. As Mr Hunt explained in his evidence:
“Large though this [sum] was, I considered that the potential market for our Documentary was so great, that it was a price well worth paying.”
Mr Hunt went on in the email:
“As for viewing the documentary, it will not get produced unless we confirm a deal in principle. And as for Apple, not for the first time the situation is as per my meeting with Rak. …”
In the course of cross-examination, Mr Hunt said that the “meeting with Rak” was a reference to a prior meeting between him and Mr Sanghvi before the negotiation with Ms Masters began, at which Mr Hunt had informed Mr Sanghvi that Apple had not approved the production of the Documentary, and Mr Sanghvi had informed Mr Hunt that such approval was not required. Mr Hunt must have been referring to the meeting in the week prior to 27 November 2009. Mr Hunt’s account of the meeting is not consistent with that given in the enclosure to WPMC’s solicitors’ letters dated 27 October 2010 and 17 November 2010 (as to which, see below), and I do not accept it.
Ms Masters responded by email on 1 February 2010 headed “Subject to contract & approval”:
“… if you are unable to supply Apple’s consent in respect to visuals etc., we are unable to proceed with seeking the relevant writer approvals for the use of our copyrights. Notwithstanding what may have been proposed, as I’ve advised in my emails and conversation with you, we require you to obtain this – we’ve been involved in many deals of a similar nature and this is the strict procedure we must follow to obtain any licensing approvals. As and when you are able to provide this, we will also require all the footage to view as part of the approval process.”
On 8 March 2010 Mr Hunt sent Ms Masters an email stating:
“Further to our telephone conversation this afternoon I hereby confirm that (a) our intended usage of Beatles copyrights infringes no rights held by Apple; (b) we have not merely legal opinion confirming this but we have gained E and O insurance covering us against this eventuality after our insurers examined the same point and came to the same conclusion; (c) there are no ongoing conversations with Apple on this point, nor have there been any communication with them since November 3rd 2009 save for an enquiry from us as to whether their position had altered and a reply from them saying it had not. At no time did they claim they had rights in the concert beyond performers, publicity and trade mark rights all of which we are respecting to the letter. For clarity, we are not proposing to exploit the property in any territory in which Apple has any performers or publicity rights, and we are not showing any trade marks, including without limitation the logo on the bass drum.”
As Mr Hunt explained in his evidence, the thinking behind this email was that Iambic would restrict exploitation of the Documentary to territories which do not confer performers’ rights on performers. Although the USA is party to the WIPO Performers and Phonograms Treaty, the USA only confers performers’ rights to a very limited extent (see Performers’ Rights (4th ed) paras. 11.21 and 11.98-11.99). In addition, Iambic would take steps to ensure that no other rights owned or controlled by Apple would be infringed.
Ms Masters asked for clarification of this proposal in an email to Mr Hunt dated 9 March 2010, to which Mr Hunt responded later that day reiterating that his proposal would not infringe Apple’s rights and asking that this information not be shared with Apple.
On 12 March 2010 Ms Masters sent Mr Hunt an email asking when the proposed Documentary would be broadcast and/or released to DVD. She also requested “… a copy of the documentary and/or footage to review which we need as part of our approval process”. Mr Hunt responded by email the same day explaining that he could not finalise a deal with a broadcaster or DVD label “when the music copyright situation is unclear”, but saying that the earliest usage would be a TV or theatrical release in the USA in September followed by DVD soon afterwards. He also explained that the Documentary had not yet been shot, and that he could show SATV the Concert Video, but that unspecified “sensitivities” of its owners prevented him sending a copy.
Ms Masters replied the same day explaining that a copy would be required, as it would need to be sent to the US for approval. Ms Masters also asked for clarification of the position concerning ownership of the Concert Video.
On 16 March 2010 Mr Hunt and Ms Masters met, and Mr Hunt showed Ms Masters the Concert Video. On 18 March 2010 Ms Masters and Mr Hunt exchanged emails regarding the provision of copies of the Concert Video to SATV US.
On 19 April 2010 Mr Hunt sent Ms Masters an email asking her to let him know “whether we have a deal for the Beatles Lost Concert”.
On 21 April 2010 Ms Masters sent Mr Hunt an email headed “SUBJECT TO SIGNED CONTRACT SUBJECT TO RESTRICTIONS AS SET OUT BELOW SUBJECT TO APPROVAL OF FINAL FILM/PROGRAMME CUT”. In the email Ms Masters stated that she was “pleased to advise that I have now received approval for the following non-exclusive use” of the Copyright Works. She quoted fees totalling £520,000, but went on to explain that there would need to be an adjustment to reflect the US rights position with regard to “Twist And Shout”. The email repeated the restrictions set out in Ms Masters’ earlier emails. In particular, it stated that “Sony/ATV has full and final approval of any re-record (if applicable) and final film(s)”. It concluded “If you wish to proceed with this, please confirm. As discussed, any final approvals are of course still subject to seeing the final film in any event”.
Mr Hunt replied on 22 April 2010:
“Thanks for your music copyright offer below. I confirm that the terms below are acceptable and would like to proceed to contract.
The final film approval is very wide as drafted. I would be grateful if you could confirm that (subject to no infringement of Apple Corp rights) there is nothing in the concert film that you have seen that would cause approval to be withheld, so long as the songs are shown in full with the original pictures, and that approval of the finished film will not be unreasonably withheld or delayed. ”
Ms Masters responded to Mr Hunt on 23 April 2010:
“Thank you for your email and that you are happy with the terms. We won’t be able to go to contract until we have provided full approval on the documentary as a whole ie with the interviews etc. Obviously we’ve provided approval on the footage as supplied to us, but our standard licensing restrictions and parameters for this catalogue stipulate we must see the final edits/version of the film/programme first. We would then be able to issue the contract.”
Although Mr Hunt’s evidence on the point was rather unsatisfactory, it appears that Iambic started work on producing the Documentary not long after these emails. At that stage Iambic had not yet raised the necessary finance, although Mr Hunt appears to have been confident that it would do so, but according to Mr Hunt it had sufficient funds of its own to make a start.
On 12 July 2010 Mr Hunt sent an email to Ms Masters saying that Iambic had “nearly finished the edit” of the Documentary and would like to arrange for her to “see and - I hope - approve it”. He proposed a meeting on 3 or 4 August 2010.
On 18 July 2010 CMC, Iambic and WPMC entered into a novation agreement which provided that WPMC stepped into the shoes of Iambic with respect to the agreement dated 6 July 2009 save that it was agreed that the costs of music copyright clearances should be paid out of gross receipts before division of net profits. On 21 July 2010 WPMC entered into an agreement with Firefly Film Sales Ltd (“Firefly”) under which WPMC appointed Firefly as its agent to exploit the rights in the Documentary in those territories which did not require the clearance of performers’ rights in return for a commission of £66,000 to be recouped from gross receipts together with an advance of £1.1 million. On the same date Firefly entered into a similar agreement with Iambic which provided for the payment of commission of 30% on gross receipts. Mr Hunt explained that these agreements were part of the mechanism by which the making of the Documentary was financed pursuant to the Enterprise Investment Scheme by a company Octopus Investments. The precise manner in which this mechanism operated (or at least was supposed to operate) is somewhat obscure, but this probably does not matter for present purposes.
At some point WPMC and Iambic entered into an undated agreement under which WPMC commissioned Iambic to produce the Documentary for WPMC at an agreed cost of £1.1 million with a delivery date of 30 November 2011. On 22 July 2010 Iambic invoiced WPMC for the sum of £1.1 million (plus VAT) for the production of the Documentary. On the same date Iambic paid Martin Marion the sum of £284,200.
On 4 August 2010 Mr Hunt met Ms Masters and showed her the Documentary as it then stood. After the meeting, Ms Masters sent Mr Hunt an email stating as follows:
“Thank you for coming in today and showing me a rough edit of the documentary which looked very promising. As discussed I will send this off to our US office for final approval and will advise as soon as I hear back.”
On 2 September 2010 Ms Masters sent Mr Hunt an email headed “Subject to Signed Contract Approval Conditional on the Lennon/McCartney restrictions as below”. In the email Ms Masters stated that she was “pleased to advise the following use is approved”. She proceeded to quote fees totalling £509,164.50 reflecting the US rights position concerning “Twist And Shout”. Again, the email reiterated that “Sony/ATV has full and final approval of any re-record (if applicable) and final film(s)”. The email concluded:
“Please confirm licensing party details and I will arrange to have the relevant synchronisation licence and invoice raised. We will also require a cue sheet of the final running order/timings etc; as well as a final copy of the programme on DVD format.”
On 3 September 2010 Mr Hunt replied to Ms Masters saying that there was a suggestion from a potential buyer that the material be re-ordered “to group the performances more” and asking whether this would require “a further approval process”. Ms Masters responded the same day saying:
“I would imagine if I can view and then break the sequences down by order to confirm to the US, this should be OK given they’ve viewed the original footage.”
Mr Hunt replied the same day saying that he would “confirm what the final final [sic] form of the film is – and show you if different” as soon as he could.
On 13 September 2010 Ms Masters asked Mr Hunt for an update and said that it would be helpful if he could give a timeline as to when he expected “licences to be completed/issued” among other things. Mr Hunt replied the same day saying that he was in the US and would respond properly in his return the following week, but “the short answer to everything being finished and done is early October”.
On 20 September 2010 Ms Masters sent Mr Hunt an email asking to “confirm the licensee details (is it Iambic Media) so that I can start the paperwork process; we’d like to get this finalised asap”. A colleague of Mr Hunt’s replied the same day saying “the contract should be with WPMC Ltd, which is now the Iambic Media rights holding company”.
On 28 September 2010 SATV discovered that Apple was planning to release its own version of the Concert Video. It appears that SATV granted Apple an exclusive licence with respect to the exploitation of the Copyright Works in the Concert Video.
On 4 October 2010 solicitors instructed on behalf of Paul McCartney, Ringo Starr and the successors to John Lennon and George Harrison sent Iambic a letter before action alleging that exploitation of the Concert Video in the UK would infringe their clients’ performers’ rights.
On 7 October 2010 Ms Masters sent Mr Hunt an email headed “Subject to Signed Contract Approval conditional on the Lennon/McCartney restrictions set out in previous correspondence” referring to the previous correspondence and stating:
“A decision has been taken not to proceed further with this negotiation. In the circumstances, we will not be issuing a licence for the proposed use which has been the subject of this negotiation and no permission is in place for exploitation of any of the copyrights concerned”.
Although the reason for the decision was not explained in this email, given that this email came shortly after the letter dated 4 October 2010 it should have been fairly obvious to Mr Hunt that Apple was behind it.
On 27 October 2010 solicitors instructed on behalf of WPMC (Thurloe & Lyndhurst LLP) wrote to SATV UK enclosing a cheque for £509,164.50, contending that SATV were contractually bound to issue a synchronisation licence to WPMC on the terms agreed in correspondence and requesting the issue of an executed synchronisation licence. Enclosed with the letter was a chronology of the negotiations, which included the following passage:
“Mr Hunt met with Mr Rakesh Sanghvi the Managing Director of Sony/ATV on 26 November 2009 and explained to him his plans for the documentary and the fact that he required a synchronisation licence in respect of the Sony/ATV copyrights. Mr Hunt told Sony/ATV that The Beatles’ former company Apple Corps (“Apple”), would be opposed to the documentary because of its determination to preserve market dominance for product in respect of which it controlled rights and to prevent competing products entering the market. Mr Hunt assured Sony/ATV that his intended usage of the Sony/ATV copyrights infringed none of Apple’s rights and made it clear that he was approaching Sony/ATV at the outset of the project because IML did not want to waste money unnecessarily and Sony/ATV’s agreement to grant a licence in respect of the Sony/ATV copyrights was crucial to the documentary being made.”
The chronology went on to allege that (i) WPMC had relied on the representations contained in Ms Masters’ emails dated 21 and 23 April 2010 by proceeding to incur substantial costs in producing the Documentary and (ii) a binding contract had been concluded by Ms Masters’ email dated 2 September 2010.
On 9 November 2010 SATV’s solicitors replied denying that any binding contract had been concluded and contending that any use by WPMC of the Copyright Works would be an infringement. They also returned WPMC’s cheque.
On 11 November 2010 WPMC and Iambic instructed different solicitors (Hamlins LLP). In a letter from Hamlins to SATV’s solicitors dated 15 November 2010 the Defendants undertook not to exploit the Copyright Works without giving SATV five clear working days’ notice.
On 16 November 2010 Apple released its version of the Concert Video on iTunes.
On 17 November 2010 Hamlins wrote to SATV’s solicitors repeating their clients’ contention that a binding contract had been concluded on 2 September 2010. This letter described the meeting between Mr Hunt and Mr Sanghvi said to have occurred on 26 November 2009 in similar (but not identical) terms to the enclosure to the letter dated 27 October 2010.
On 18 November 2010 SATV’s solicitors replied again disputing that a contract had been concluded. Apart from a request by Hamlins for a copy of an email which was duly supplied, the correspondence came to an end at that point.
On 14 February 2011 Prof Jaszi provided an opinion to Iambic for insurance purposes in which he expressed the view that exploitation of the Documentary in the USA would not infringe the US copyrights in the 12 songs incorporated in it because the Concert Video was in the public domain and/or because it would amount to fair use. (Although the Defendants originally relied on the public domain defence in these proceedings, and although it is relied on by Ace in the US proceedings, WPMC withdrew this defence during the course of the trial in circumstances which it is unnecessary to relate here.)
On 14 February 2012 Iambic and WPMC entered into an agreement with Ace under which Iambic and WPMC granted Ace a licence to exploit the Documentary in the USA, in particular via Screenvision Exhibition Inc (“Screenvision”).
On 16 March 2012 Ace and Screenvision entered into an agreement amending a prior agreement dated 27 September 2011 so that the latter applied to the Documentary. Although not spelt out in the agreement, what Screenvision was proposing was to screen the Documentary in a limited run in 450 or 500 cinemas in the USA on 17 and 22 May 2012.
On 15 March 2012 Mr Hunt telephoned Mr Sanghvi to discuss this proposal. He followed this up with an email dated 18 March 2012 enclosing a summary of Prof Jaszi’s opinion. The email stated that Iambic planned screenings in the USA in mid-May and that, although Iambic did not consider that SATV had any case to claim music copyright, it would offer an ex gratia payment. On 20 April 2012 Mr Hunt sent Mr Sanghvi an email chasing for a reply.
Also on 20 April 2012 SATV’s solicitors sent WPMC a letter stating that SATV had discovered that the Documentary was being promoted on the Website, which featured the Trailer, and that SATV had not consented to the use of the Copyright Works. The letter sought confirmation that WPMC would make no further use of the Copyright Works without first negotiating a licence. It stated that SATV would not grant any such licence without first seeing the Documentary, and that “for the avoidance of doubt, it is within our client’s sole discretion whether or not to grant a licence”. As the letter records in a postscript, Andrew Forbes of SATV’s solicitors spoke to Mr Hunt after the letter was drafted. In that conversation Mr Hunt stated that WPMC had an opinion that it was entitled to exploit the Copyright Works in the Documentary without a licence.
On 23 April 2012 SATV’s solicitors sent Mr Hunt an email chasing for a response to their letter. Mr Hunt replied on the same day saying (among other things):
“Regarding the film itself it was seen and approved by Sony ATV in September 2010, and is unchanged – except for picture restoration – since then.”
On 24 April 2012 SATV’s solicitors replied denying that the Documentary had been approved on the grounds that all Ms Masters had been shown was a “rough edit”, that Mr Hunt had said that further material might be included or the order changed and that the Trailer included interviews with artists which had not been included in the rough edit which Ms Masters had seen.
Mr Hunt replied the same day by forwarding copies of his email exchanges with Ms Masters and saying that he was “about to send Rak Sanghvi a link to enable him to view the finished film”. He did not respond to the suggestion that the Trailer contained additional interviews to the “rough edit” seen by Ms Masters in September 2010.
Immediately afterwards Mr Hunt sent Mr Sanghvi an email saying:
“[SATV’s solicitors] said no-one at Sony ATV had seen the finished film. I’m fairly sure that is incorrect but in any event below is a link for you … to view.”
Mr Sanghvi replied later the same day saying:
“The question of approval was dealt with in the last round of correspondence towards the end of 2010. We haven’t approved yet, and we need to deal with the question of negotiation of a licence first … - although that doesn’t mean that we’re guaranteeing that we would in any event grant a licence.”
On 25 April 2012 SATV’s solicitors wrote to WPMC and Iambic disputing that no licence was required to exploit the Copyright Works in the Documentary and rejecting the “ex gratia payment” offered by Mr Hunt.
On 26 April 2012 Mr Hunt sent SATV’s solicitors two emails one of which attached a redacted copy of Prof Jaszi’s opinion and the other of which stated:
“I was perplexed by your claims regarding the trailer as the one we supplied does not contain music published by Sony/ATV. However upon checking we have found that the website set up by the US distributor’s marketing team contains a longer trailer which does feature music published by your clients. This was done neither by us nor with our knowledge or consent. We have now contacted them and told them to remove it forthwith; they have already confirmed that they will do so asap.
I am sorry this had occurred, We do not have and never have had any intention of breaching Sony/ATV’s copyrights and remain keen to discuss the rights position and come to a sensible and amicable arrangement with you. …”
On the same day Mr Hunt sent Peter Brodsky of SATV US an email explaining in some detail what Screenvision was proposing to do and seeking a synchronisation licence. He ended his email by emphasising that it was not his intention to infringe any copyrights.
On 27 April 2012 Mr Hunt arranged for a DVD of the Documentary to be delivered to Mr Brodsky. On the same day Iambic emailed the cue sheet referred to in paragraph 19 above to Mr Brodsky.
Later the same day Mr Brodsky sent Mr Hunt by email a quotation for a synchronisation licence for a limited US theatrical release of the Documentary. This was expressed to be “subject to contract”.
On 30 April 2012 Mr Hunt replied to Mr Brodsky with a counter-offer. On the same day Mr Brodsky responded:
“Chris your offer is not acceptable. These compositions are some of our most valuable assets. As the owner of the exclusive copyrights, we are highly protective of our rights and our writers’ interests. Absent some countervailing reason, we would not license a use that would diminish the value of the copyrights, economically or otherwise. Your proposal essentially seeks a gratis licence. It is economically unacceptable and would diminish the value of these copyrights. …
Accordingly, the issue is very simple: you wish to capitalize on the incredibly valuable copyrighted compositions that Sony/ATV owns to sell your film without having to pay anything remotely close to fair value for the use of the songs. You are not seeking some incidental use of snippets of musical compositions. You have used the entire musical compositions, or substantially all of them, in addition to numerous other large excerpts of the compositions, that go far beyond any even arguable ‘snippet’ for the purpose of commentary or context.
If you cannot afford to license these songs on a basis that is consistent with their value, then you cannot distribute the film.”
After some further correspondence during which no agreement was reached, SATV commenced these proceedings and made an application for urgent interim relief on 2 May 2012. That application came before Briggs J (as he then was) on 4 May 2012, when directions were given for it to be determined with expedition. In the meantime Mr Hunt made a witness statement on 3 May 2012 in which he placed reliance upon Prof Jaszi’s opinion, the events of March and April 2012 and the balance of convenience. No mention was made of the negotiations in 2009-2010, still less did Mr Hunt contend that SATV were contractually bound to grant a licence as a result. Subsequently the Defendants gave the undertakings recorded in the order of David Richards J dated 15 May 2012. On 12 July 2012 the Defendants served their Defence, drafted by Mr Hunt, and again no case in contract was advanced at that stage.
On 26 November 2012 Mr Hunt on behalf of WPMC wrote to Firefly stating that the Documentary “remains unfinished and undelivered while a music copyright issue ... is sorted”.
Issue 1: Collateral contract
WPMC contends that a binding contract was concluded between Iambic and SATV under which SATV became obliged to issue a synchronisation licence provided that Iambic complied with the conditions stipulated by SATV and paid the agreed fee. WPMC’s primary case is that the contract was concluded by an offer contained in Ms Masters’ email dated 21 April 2010 which was accepted by Mr Hunt’s email dated 22 April 2010. WPMC’s alternative case is that the contract was concluded by Ms Masters’ email dated 2 September 2010. WPMC further contends that the benefit of the contract was assigned by Iambic to WMPC. SATV dispute each of these contentions.
WPMC’s primary case
In my judgment WPMC’s primary case fails for three independent reasons. The first reason is that Mr Hunt’s email dated 22 April 2010 was not an acceptance of the offer contained in Ms Masters’ email dated 21 April 2010. Rather, it was a counter-offer. This is because Mr Hunt did not accept the final approval requirement contained in Ms Masters’ email and requested that this be modified, in particular by the stipulation that approval of the finished film would not be unreasonably withheld or delayed. I would add that WPMC rightly do not contend that SATV accepted this counter-offer: it can be seen from Ms Masters’ email dated 23 April 2010 that she did not agree that approval of the finished film would not be unreasonably withheld or delayed.
The second reason is that the negotiations, and in particular Ms Masters’ email dated 21 April 2010, were expressly “subject to contract”. In RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG[2010] UKSC 14, [2010] 1 WLR 753 at [49] Lord Clarke of Stone-cum-Ebony giving the judgment of the Supreme Court quoted with approval the following summary of the relevant principles by Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 619:
“(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole...
(2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case.
(3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed...
(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled...
(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty
(6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”
As Lord Clarke emphasised at [45], the question of whether a binding contract has been concluded depends not on the parties’ subjective state of mind, but upon an objective assessment of what was communicated between them.
In the present case both Ms Masters and Mr Hunt used the expression “subject to contract” in their communications. Ms Masters was negotiating on behalf of an experienced licensor of music copyrights. Mr Hunt was negotiating as someone with considerable experience of music copyright licensing. As he accepted, he was aware that a synchronisation licence would contain various detailed terms. Furthermore, for what it is worth, he accepted that he understood the conventional meaning of the expression “subject to contract”. It follows that there is no reason to depart from the conventional meaning of that expression in this case. On the contrary, in her email dated 21 April 2010 Ms Masters was careful enough expressly to stipulate that her offer was “subject to signed contract”, thus making it crystal clear that SATV did not intend to be bound unless and until a contract was signed. Counsel for WPMC argued that the words “subject to signed contract” meant that a signed contract would be forthcoming provided that SATV’s stated conditions were complied with. I do not accept this.
The third reason is that Ms Masters’ email dated 21 April 2010 was not only expressed to be subject to contract, it was also expressed to be subject to approval of the final film. Ms Masters made it crystal clear that SATV would not grant a synchronisation licence unless and until they had seen and approved the final film. Moreover, she made it clear that SATV retained complete discretion to grant or withhold approval. Mr Hunt fully appreciated this, as can be seen from his attempt to secure Ms Masters’ agreement to a term that approval would not be unreasonably withheld or delayed. At that stage, there was no question of SATV having approved the Documentary, since it had not yet been produced.
WPMC’s alternative case
WPMC’s alternative case that a contract was concluded as result of Ms Masters’ email dated 2 September 2010 involves three propositions. The first is that, by then, all the essential terms of the synchronisation licence had been agreed. The second is that SATV had seen and approved the Documentary. The third that the negotiations had ceased to be subject to contract. I shall consider these propositions in turn.
So far as the first proposition is concerned, counsel for SATV submitted that the detailed terms of the synchronisation licence remained to be negotiated as at 2 September 2010. This is true, but nevertheless I consider that all the essential commercial terms had been agreed. All that remained to be discussed and agreed were the boilerplate clauses of the licence. As it happens, the standard SATV template which counsel for SATV put to Mr Hunt in cross-examination contained a term which Mr Hunt explained was obviously inappropriate in these circumstances. I do not consider that this shows that anything of substance remained to be negotiated, particularly in the absence of any evidence from SATV that they would have insisted upon, or even attached any importance to, that term in such circumstances.
As for the second proposition, the evidence is in a remarkably unsatisfactory state. It is not clear precisely what SATV were shown on 4 August 2010, nor is it clear precisely what changes were made by Iambic/WPMC subsequently. Counsel for SATV relied on Ms Masters’ description of it as a “rough edit” and upon various statements by Mr Hunt in the subsequent correspondence (such as the letter dated 26 November 2012) as demonstrating that what SATV was shown on 4 August 2010 was not the final version of the Documentary, and hence SATV had not approved the final version. Mr Hunt’s evidence, however, was that what he showed Ms Masters was not properly described as a rough edit, but was essentially the final edit subject to picture restoration of the Concert Video material, the addition of subtitles identifying the interviewees and final mixing of the soundtrack, all of which was completed some time in 2011. (As I understand, it was also intended to remove the Beatles’ trade marks and Mr Hunt said that work had been done on this as well. In fact, the version of the Documentary I have seen does not have the Beatles’ trade marks removed, but nothing turns on this for present purposes.)
In my judgment the conclusion to be drawn from the correspondence on 2 and 3 September 2010 is that the parties understood that what Mr Hunt had shown Ms Masters on 4 August 2010 was sufficiently close to being finished for SATV to be able to decide whether or not to give its approval, but that if Iambic made any changes of substance a further approval process would be required. In the first paragraph of her email dated 2 September 2010 Ms Masters stated that “the following use is approved” and in the last paragraph she said that, once the identity of the licensee had been confirmed, “I will arrange to have the relevant synchronisation licence and invoice raised”. When Mr Hunt asked on 3 September 2010 whether a change to the grouping of the performances would require “a further approval process”, Ms Masters’ reply was to the effect that all that she would need to do would be to view the film to check that only the order had been changed. Mr Hunt then confirmed that he would show Ms Masters the final film “if different”.
I see no reason not to accept Mr Hunt’s evidence as to what was done subsequently. Accordingly, I conclude that what SATV were shown on 4 August 2010 and approved on 2 September 2010 was in substance the final version of the Documentary.
Turning to the third proposition, Ms Masters’ email dated 2 September 2010 was again expressly stated to be “subject to signed contract”. Counsel for WPMC again submitted that this meant that a signed contract would be forthcoming. Again I do not accept this. In my judgment the objective interpretation of these words is that they meant what they said.
Counsel for WPMC also submitted in the alternative that the “subject to contract” restriction had been waived. In support of this submission, he relied upon the decision of the Supreme Court in the RTS case, where the Court concluded that a term of equivalent effect had indeed been waived. But the reasons given by Lord Clarke for this conclusion can be seen from the following passages in his judgment:
“60. We entirely agree with the judge that the parties initially intended that there should be a written contract between them which was executed by each and exchanged between them. We further accept that, if the matter were tested on, say, 5 July, the correct conclusion may well have been that that remained the position and that there was no binding agreement between them. However, that is not on the basis that the parties had not reached agreement (or sufficient agreement) but because the agreement they had reached remained (in the traditional language) 'subject to contract'. Thus, as correctly submitted in Müller's skeleton argument before the judge, the agreement was ready for execution at that stage but was subject to contract. In the same skeleton argument Müller correctly submitted that the question was, objectively speaking, whether the parties' intentions took a new turn at some stage such that they intended to be bound by the 'final draft contract' without the need for its formal execution. ...
61. The striking feature of this case which makes it very different from many of the cases which the courts have considered is that essentially all the terms were agreed between the parties and that substantial works were then carried out and the agreement was subsequently varied in important respects. The parties treated the agreement of 25 August as a variation of the agreement that they had reached by 5 July. Nobody suggested in August that there was no contract and thus nothing to vary. It was not until November, by which time the parties were in dispute, that points were taken as to whether there was a contract.
62. We have reached the firm conclusion that by 25 August at the latest the parties' communications and actions lead to the conclusion that they had agreed that RTS would perform the work and supply the materials on the terms agreed between them up to and including 5 July as varied by the agreement of 25 August. Thereafter the work continued on a somewhat different basis because of the provision of Line 1 before Line 2. As stated above, it does not seem to us to make commercial sense to hold that the parties were agreeing to the works being carried out without any relevant contract terms. In this regard we agree with the judge.
…
86. The first point remains. Had the parties agreed to be bound by the agreed terms without the necessity of a formal written contract or, put another way, had they agreed to waive that requirement and thus clause 48? We have reached the conclusion that they had. The circumstances point to the fact that there was a binding agreement and that it was not on the limited terms held by the judge. The Price had been agreed, a significant amount of work had been carried out, agreement had been reached on 5 July and the subsequent agreement to vary the Contract so that RTS agreed to provide Line 1 before Line 2 was reached without any suggestion that the variation was agreed subject to contract. The clear inference is that the parties had agreed to waive the subject to contract clause, viz clause 48. Any other conclusion makes no commercial sense. RTS could surely not have refused to perform the contract as varied pending a formal contract being signed and exchanged. Nobody suggested that it could and, of course, it did not. If one applies the standard of the reasonable, honest businessman suggested by Steyn LJ, we conclude that, whether he was an RTS man or a Müller man, he would have concluded that the parties intended that the work should be carried out for the agreed price on the agreed terms, including the terms as varied by the agreement of 25 August, without the necessity for a formal written agreement, which had been overtaken by events.
87. By contrast we do not think that the reasonable honest businessman in the position of either RTS or Müller would have concluded as at 25 August that there was no contract between them or that there was a contract on some but not all of the terms that had been agreed on or before 5 July as varied by the agreement of 25 August. Although this is not a case quite like the Percy Trentham case because that was not a subject to contract case, it was equally not a case like the British Steel case because here all the terms which the parties treated as essential were agreed and the parties were performing the contract without a formal contract being signed or exchanged, whereas there parties were still negotiating terms which they regarded as essential. As Mr Brown said, instead of signing the contract the parties here simply let sleeping dogs lie or, as Mr Manzoni put it in his skeleton argument at first instance, neither party wanted the negotiations to get in the way of the project. The project was the only important thing. The only reasonable inference to draw is that by or on 25 August, the parties had in effect agreed to waive the ‘subject to contract’ provision encapsulated by clause 48. ...”
In my judgment this reasoning does not apply to the facts of the present case for two reasons. First, WPMC’s pleaded (alternative) case is that the contract was concluded by the email dated 2 September 2010. But that email clearly maintained the “subject to signed contract” restriction. There is nothing in the email itself which can be construed as a waiver of it. Secondly, even if it is permissible to take into account subsequent events, nothing occurred between 2 September and 7 October 2010 which shows that the parties agreed to waive the requirement for a signed contract. On the contrary, Ms Masters’ emails dated 13 and 20 September 2010 and WPMC’s email of 20 September 2010 demonstrate that both parties were proceeding towards the signature of a contract. Moreover, this is not a case where there was any performance of the putative contract by either party prior to the dispute arising.
Assignment of the benefit of the contract
WPMC’s pleaded case is that the benefit of the contract was assigned to WPMC in July 2010. No particulars of the alleged assignment have been given by WPMC. Nor did Mr Hunt give evidence of any such assignment. It appears that what WPMC may be relying on is the novation agreement dated 18 July 2010, but this does not assign the benefit of any contract with SATV. Accordingly, I conclude that WPMC has failed to establish that Iambic assigned the benefit of any contract with SATV to WPMC.
Issue 2: Proprietary estoppel
WPMC contends that, by Ms Masters’ email dated 21 April 2010, SATV represented that it would grant Iambic a synchronisation licence provided that Iambic complied with conditions stipulated by SATV, and that, by Ms Masters’ email dated 2 September 2010, SATV represented that the Documentary did comply with those conditions. WPMC further contends that it reasonably relied on these representations to its detriment by producing the Documentary and expending considerable sums of money to that end, and accordingly that it would be unconscionable for SATV to deny that WPMC was entitled to a synchronisation licence.
Although counsel for WPMC did not make the point explicitly, as I understand it, WPMC relies upon Ms Masters’ email dated 2 September 2010 and WPMC’s email dated 20 September 2010 as showing that the representations were made to, and reasonably relied upon by, WPMC as well as Iambic. I did not understand counsel for SATV to dispute this point, if the defence was otherwise made out.
It is common ground that a defence of proprietary estoppel can be advanced in respect of intellectual property rights such as copyrights: see Motivate Publishing FZ LLC v Hello Ltd[2015] EWHC 1554 (Ch). SATV contend, however, that WPMC cannot rely upon the representations in question as founding an estoppel because they were expressed to be subject to contract. In this regard, counsel for SATV relied in particular upon the following statement of principle by Lord Scott of Foscote, with whom Lord Hoffmann, Lord Brown of Eaton-under-Heywood and Lord Mance agreed, in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752 at [25]:
“The reason why, in a ‘subject to contract’ case, a proprietary estoppel cannot ordinarily arise is that the would-be purchaser's expectation of acquiring an interest in the property in question is subject to a contingency that is entirely under the control of the other party to the negotiations: see also British Steel Corporation v Cleveland Bridge and Engineering Co. Ltd [1984] 1 AER 504 at 511 per Robert Goff J; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; London & Regional Investments Ltd v TBI Plc. [2002] EWCA 355 at [42] per Mummery LJ and Pridean v Forest Taverns (1996) 75 P&CR 447. The expectation is therefore speculative.”
In my judgment this statement of principle applies to the facts of the present case. As discussed above, the representations relied upon by Iambic and WPMC were expressly stipulated to be “subject to signed contract”. Accordingly, they could not be relied upon as having legal effect unless and until a contract was signed, and Iambic and WPMC must be taken to have been aware of this. In the event, no contract was signed. In those circumstances it is not unconscionable for SATV to deny that WPMC is entitled to a licence. Both Mr Hunt in his evidence and counsel for WPMC in his submissions argued that it was plain from the correspondence that there was an agreement in principle, and that, as SATV were aware, it was that agreement in principle which gave Iambic the confidence to proceed with producing the Documentary. I have no difficulty in accepting this, but the fact remains that it was - and Mr Hunt must have known it was - only an agreement in principle, not a legally binding contract. In proceeding to produce the Documentary without an executed synchronisation licence, Iambic and WPMC took the risk that SATV would decline to conclude one. Mr Hunt and counsel for WPMC asserted that no producer would deal with SATV if they were free to withdraw from such an agreement in principle. Whether that is correct is not for me to judge, but as a matter of law I consider SATV were entitled to act as they did.
Issue 3: Fair use
Principles
Section 107 of the US Copyright Act (Title 17 of the US Code) provides as follows:
“Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.”
Section 107 is a codification dating from 1976 of a doctrine which had previously been part of the common law in the USA. Section 107 is largely based on the seminal judgment of Justice Story in Folsom v Marsh F.Cas. 342 (C.C.D. Mass., 1841). The doctrine of fair use has not stood still since 1976, however.
In 1990 Judge Pierre Leval (then of the Southern District of York, now of the 2nd Circuit Court of Appeals) published an influential article entitled “Toward a Fair Use Standard” 103 Harv. L. Rev. 1105 in which he argued at 1111-1112 (footnotes omitted):
“I believe the answer to the question of justification turns primarily on whether, and to what extent, the challenged use is transformative. The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original.
A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story’s words, it would merely ‘supersede the objects’ of the original. If, on the other hand, the secondary use adds value to the original - if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings - this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.
Transformative uses may include criticizing the quoted work, exposing the character of the original author, proving a fact, or summarizing an idea argued in the original in order to defend or rebut it. They also may include parody, symbolism, aesthetic declarations, and innumerable other uses.
The existence of any identifiable transformative objective does not, however, guarantee success in claiming fair use. The transformative justification must overcome factors favoring the copyright owner. A biographer or critic of a writer may contend that unlimited quotation enriches the portrait or justifies the criticism. The creator of a derivative work based on the original creation of another may claim absolute entitlement because of the transformation. Nonetheless, extensive takings may impinge on creative incentives. And the secondary user’s claim under the first factor is weakened to the extent that her takings exceed the asserted justification. The justification will likely be outweighed if the takings are excessive and other factors favor the copyright owner.”
At present the leading case on fair use is the decision of the Supreme Court in Campbell v Acuff-Rose Music Inc 510 US 569 (1994). That was a case about parody, but the general principles articulated by the Court are not restricted to parodies: see e.g. Blanch v Koons 467 F.3d 244 at 255 (2nd Cir., 2006). In his opinion for a unanimous Court, Justice Souter cited Judge Leval’s article no less than seven times. Since 1994 there has been extensive further case law on fair use at Circuit Court of Appeal level, in which the central importance of the concept of transformative use has been increasingly recognised. This has become particularly so during the last 10 years.
The fair use doctrine has often been criticised as indeterminate and unpredictable. Over the last decade, however, work by scholars such as Pamela Samuelson, Barton Beebe and Matthew Sag has demonstrated that what at first blush may appear to be an amorphous mass of individual decisions can be analysed and categorised in the same way as other areas of common law (negligence, for example). Prof Jaszi cited an article by Neil Weinstock Netanel, “Making Sense of Fair Use” 14 Lewis & Clark L. Rev. 715 (2011) which, building on the work of these earlier scholars, provides a helpful overview of the doctrine as it is currently interpreted and applied. Nevertheless, the doctrine remains flexible and fact-sensitive.
Although the experts referred to quite a number of other cases in addition to Campbell, and I was taken to several of these in closing submissions, I do not consider that it is necessary to refer specifically to all of them in this judgment.
Factor (1). In Campbell Justice Souter made two important points about this factor. The first concerns the significance of transformative use (at 578-579, footnote omitted):
“The enquiry here may be guided by the examples given in the preamble to §107, looking to whether the use is for criticism, or comment, or news reporting, and the like, see §107. The central purpose of this investigation is to see, in Justice Story’s words, whether the new work merely ‘supersede[s] the objects’ of the original creation, Folsom v. Marsh, supra, at 348; accord, Harper & Row, supra, at 562 (‘supplanting’ the original), or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is ‘transformative.’ Leval 1111. Although such transformative use is not absolutely necessary for a finding of fair use, Sony, supra, at 455, n. 40, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright, see, e. g., Sony, supra, at 478-480 (Blackmun, J., dissenting), and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.”
It can be seen from this that Justice Souter endorsed Judge Leval’s analysis. As indicated above, this statement of principle has been central to the subsequent development of the law.
The second concerns the significance of commercial use (at 584-585):
“The language of the statute makes clear that the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry into its purpose and character. Section 107(1) uses the term ‘including’ to begin the dependent clause referring to commercial use, and the main clause speaks of a broader investigation into ‘purpose and character.’ As we explained in Harper & Row, Congress resisted attempts to narrow the ambit of this traditional enquiry by adopting categories of presumptively fair use, and it urged courts to preserve the breadth of their traditionally ample view of the universe of relevant evidence. 471 U. S., at 561; House Report, p. 66. Accordingly, the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement, any more than the commercial character of a use bars a finding of fairness. If, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of §107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities ‘are generally conducted for profit in this country.’ Harper & Row, supra, at 592 (Brennan, J., dissenting). Congress could not have intended such a rule, which certainly is not inferable from the common law cases, arising as they did from the world of letters in which Samuel Johnson could pronounce that ‘[n]o man but a blockhead ever wrote, except for money.’ 3 Boswell's Life of Johnson 19 (G. Hill ed. 1934).
Sony itself called for no hard evidentiary presumption. There, we emphasized the need for a ‘sensitive balancing of interests,’ 464 U. S., at 455, n. 40, noted that Congress had ‘eschewed a rigid, bright line approach to fair use,’ id., at 449, n. 31, and stated that the commercial or nonprofit educational character of a work is ‘not conclusive,’ id., at 448-449, but rather a fact to be ‘weighed along with other[s] in fair use decisions.’ Id., at 449, n. 32 (quoting House Report, p. 66). The Court of Appeals's elevation of one sentence from Sony to a per se rule thus runs as much counter to Sony itself as to the long common law tradition of fair use adjudication. Rather, as we explained in Harper & Row,Sony stands for the proposition that the ‘fact that a publication was commercial as opposed to nonprofit is a separate factor that tends to weigh against a finding of fair use.’ 471 U. S., at 562. But that is all, and the fact that even the force of that tendency will vary with the context is a further reason against elevating commerciality to hard presumptive significance. The use, for example, of a copyrighted work to advertise a product, even in a parody, will be entitled to less indulgence under the first factor of the fair use enquiry, than the sale of a parody for its own sake, let alone one performed a single time by students in school. …”
Factor (2). Justice Souter explained in Campbell (at 586) that this factor “calls for recognition that some works are closer to the core of intended copyright protection than others, with the consequence that fair use is more difficult to establish when the former works are copied”.
Factor (3). As Justice Souter explained in Campbell (at 586-587):
“The third factor asks whether ‘the amount and substantiality of the portion used in relation to the copyrighted work as a whole,’ §107(3) (or, in Justice Story's words, ‘the quantity and value of the materials used,’ Folsom v. Marsh, supra, at 348) are reasonable in relation to the purpose of the copying. Here, attention turns to the persuasiveness of a parodist's justification for the particular copying done, and the enquiry will harken back to the first of the statutory factors, for, as in prior cases, we recognize that the extent of permissible copying varies with the purpose and character of the use. See Sony, 464 U. S., at 449-450 (reproduction of entire work ‘does not have its ordinary effect of militating against a finding of fair use’ as to home videotaping of television programs); Harper & Row, 471 U. S., at 564 (‘[E]ven substantial quotations might qualify as fair use in a review of a published work or a news account of a speech’ but not in a scoop of a soon to be published memoir). The facts bearing on this factor will also tend to address the fourth, by revealing the degree to which the parody may serve as a market substitute for the original or potentially licensed derivatives. See Leval 1123.
…
The Court of Appeals is of course correct that this factor calls for thought not only about the quantity of the materials used, but about their quality and importance, too. In Harper & Row, for example, the Nation had taken only some 300 words out of President Ford's memoirs, but we signalled the significance of the quotations in finding them to amount to ‘the heart of the book,’ the part most likely to be newsworthy and important in licensing serialization. 471 U. S., at 564-566, 568 (internal quotation marks omitted). We also agree with the Court of Appeals that whether ‘a substantial portion of the infringing work was copied verbatim’ from the copyrighted work is a relevant question, see id., at 565, for it may reveal a dearth of transformative character or purpose under the first factor, or a greater likelihood of market harm under the fourth; a work composed primarily of an original, particularly its heart, with little added or changed, is more likely to be a merely superseding use, fulfilling demand for the original.”
The Supreme Court’s conclusion with respect to this factor on the facts of the case was as follows (at 589):
“Suffice it to say here that, as to the lyrics, we think the Court of Appeals correctly suggested that ‘no more was taken than necessary,’ 972 F. 2d, at 1438, but just for that reason, we fail to see how the copying can be excessive in relation to its parodic purpose, even if the portion taken is the original's ‘heart.’ As to the music, we express no opinion whether repetition of the bass riff is excessive copying, and we remand to permit evaluation of the amount taken, in light of the song's parodic purpose and character, its transformative elements, and considerations of the potential for market substitution sketched more fully below.”
SATV contend that the defendant must show that no more has been taken of the copyright work than is necessary for the transformative purpose. I do not accept this reading of Campbell. In my judgment what the defendant must show is that the amount taken is reasonable, and not excessive. If no more is taken than is necessary, then that will be reasonable. The defendant does not have to show that he has taken the minimum necessary, however. I am not persuaded that any of the other cases to which my attention has been drawn establish that this is the law, and Professor Netanel’s analysis (at 768) indicates the opposite.
WPMC contend that it can be fair use to copy the whole of the copyright work where this is justified by the transformative purpose, particularly but not exclusively if the copy is not a high quality one (e.g. where an image is reduced in size). I accept this proposition, which is supported by cases such as Kelly v Arriba Soft Corp 336 F.3d 811 (9th Cir., 2003), Bill Graham Archives v Dorling Kindersley Ltd 448 F.3d (2nd Cir., 2006), Perfect 10 Inc v Amazon Inc 508 F.3d 1146 (9th Cir., 2007) and Authors Guild v HathiTrust 755 F.3d 97 (2nd Cir., 2014).
Factor (4). As Justice Souter explained in Campbell (at 590, footnotes omitted):
“The fourth fair use factor is ‘the effect of the use upon the potential market for or value of the copyrighted work.’ §107(4). It requires courts to consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also ‘whether unrestricted and widespread conduct of the sort engaged in by the defendant . . . would result in a substantially adverse impact on the potential market’ for the original. Nimmer §13.05[A][4], p. 13-102.61 (footnote omitted); accord Harper & Row, 471 U. S., at 569; Senate Report, p. 65; Folsom v. Marsh, 9 F. Cas., at 349. The enquiry ‘must take account not only of harm to the original but also of harm to the market for derivative works.’ Harper & Row, supra, at 568.
Since fair use is an affirmative defense, its proponent would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets. In moving for summary judgment, 2 Live Crew left themselves at just such a disadvantage when they failed to address the effect on the market for rap derivatives, and confined themselves to uncontroverted submissions that there was no likely effect on the market for the original. …
No ‘presumption’ or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes. Sony's discussion of a presumption contrasts a context of verbatim copying of the original in its entirety for commercial purposes, with the non commercial context of Sony itself (home copying of television programming). In the former circumstances, what Sony said simply makes common sense: when a commercial use amounts to mere duplication of the entirety of an original, it clearly ‘supersede[s] the objects,’ Folsom v. Marsh, 9 F. Cas., at 348, of the original and serves as a market replacement for it, making it likely that cognizable market harm to the original will occur. Sony, 464 U. S., at 451. But when, on the contrary, the second use is transformative, market substitution is at least less certain, and market harm may not be so readily inferred. …”
Assessment
Before turning to consider the four statutory factors, it is important to note that WPMC’s pleaded case is a bare assertion of fair use. WPMC never particularised the facts and matters it relied upon in support of that assertion. Nor did WPMC adduce any factual evidence in support of its defence of fair use. In consequence, SATV did not adduce any factual evidence either. Given that the burden lies upon WPMC to demonstrate fair use, this is a point of some significance.
Factor (1). It is common ground that the Documentary amounts to a commercial use of the Copyright Works. WPMC contends that the Documentary is nevertheless a transformative use of the Copyright Works. SATV dispute this. In my view the Documentary is partly transformative, but it is not wholly transformative.
It is partly transformative in that it is a serious, albeit entertaining, study of the impact of the Beatles on the USA. More specifically, it places the Concert - and hence the performances of the Copyright Works - in historical, musicological, cultural and sociological perspective by means of contextualising material of various different kinds as described above.
It is not wholly transformative, however, because the performances of the Copyright Works are presented in their entirety in blocks (and, as noted above, there are also additional uses of the Copyright Works). Furthermore, there is relatively little in the way of commentary specifically on the Copyright Works, or even of their performances, as opposed to general comments on the Beatles and the Concert. As counsel for SATV submitted, it is apparent both from the contents of the Documentary itself and from the surrounding evidence that the performances of the Copyright Works are being presented for their intrinsic entertainment value. This can be seen from:
The title of the Documentary namely “The Beatles: The Lost Concert”. This title accurately captures the nature of the Documentary and the market it targets. The Documentary is not entitled e.g. “The Beatles: A Cultural Revolution”.
The nature of the observations made by the interviewees in the Documentary. Tellingly, immediately before the first section of the Concert Video commences, Mr Gambaccini says “for those of us who weren’t at a Beatles show, we are now”.
The commercial arrangements for exploitation of the Concert Video. Thus the CMC/Iambic agreement dated 6 July 2009 defines the Documentary as “based on and incorporating the [Concert Video]”. Consistently with the nature of the exploitation contemplated, a 50/50 profit share of all proceeds of exploitation of the Documentary and the Concert Video is provided for. This is replicated in the later novation agreement.
The manner in which the Documentary was marketed on the Website, where it was described as “A New Documentary including their 1st US Concert – Complete and Remastered” and the statement was made that “The entire concert (the ONLY complete Beatles concert available to fans) is included in the Beatles: The Lost Concert”.
WPMC’s attitude towards the Apple version of the Concert Video as a competitor to the Documentary. Thus Hamlins’ letter dated 17 November 2010 stated:
“What is evident is that as a result of the actions taken by your client and the release of the film by Apple Corps, even if our client intended to release the film within the next few months it is not financially viable.”
Factor (2). It is common ground that the Copyright Works are fully expressive works falling within the core of copyright protection.
Factor (3). It is common ground that the Documentary reproduces the entirety of each of the Copyright Works. WPMC relies upon the fact that the performances of the Copyright Works recorded in the Concert Video, and used in the Documentary, are relatively poor ones, in the sense that the Beatles were performing live (rather than in a recording studio) in difficult conditions (they had no monitors, for example) with a considerable level of extraneous noise (mainly loud screaming from the fans) and the performances were recorded using very unsophisticated equipment. In my view this is not very significant. As WPMC itself argues, despite these limitations, the performances not only generated great excitement among the audience at the time, but also remain exciting to this day.
WPMC accepts that use of the entirety of each of the Copyright Works is more than the minimum necessary, but contends that it is reasonable having regard to the transformative purpose. In particular, Counsel for WPMC argued that it was reasonable to include the whole of each of the Copyright Works in order to demonstrate the effect of the Beatles’ performances. SATV dispute that the extent of the use is reasonable even if that is the correct test. In my view the amount copied is clearly excessive. If the Documentary had merely used a number of excerpts from the Concert Video, and hence of the Copyright Works, then that might well have been reasonable having regard to the transformative purpose. As it is, however, the Documentary goes well beyond that. As discussed above, it incorporates almost the whole of the Concert Video, and hence the whole of each of the Copyright Works. Thus what WPMC are presenting amounts to a package of the Concert Video with additional material. Furthermore, there is substantial additional use of the Copyright Works as part of the soundtrack. Not only does the usage exceed what is necessary to illustrate the nature and effect of the Beatles’ performances of the Copyright Works, it exceeds what is reasonable for that purpose.
Factor (4). For the reasons explained above, there is no market or economic evidence before the court. WPMC asserts, without the benefit of supporting evidence, that the Documentary would not damage the market for, or potential value of, the Copyright Works. In support of this assertion, WPMC argues that no one would buy the Documentary as a substitute for authorised recordings of performances of the Copyright Works. SATV dispute this, contending in particular that there is a clear likelihood of damage to the potential market for synchronisation licences for the Copyright Works if such use is permitted.
In my view WPMC has failed to establish that the Documentary would not damage the market for, or potential value of, the Copyright Works if permitted as fair use. On the contrary, I consider that it is likely that this would damage the market for, or potential value of, the Copyright Works. This is for two main reasons.
First, there is the market for the sale of recordings of performances of the Copyright Works. As noted above, WPMC argues that no one would buy the Documentary as a substitute for authorised recordings of performances of the Copyright Works. This argument is predicated on the assumption that the relevant market is the market for recordings of studio performances of the Copyright Works made by the Beatles. But that does not appear to me to be the relevant market. Rather, the relevant market is the market for recordings of live performances of the Copyright Works by the Beatles. More specifically, it is the market for audiovisual recordings of live performances. There is no evidence before the court as to how many other audiovisual recordings of live performances of the Copyright Works by the Beatles are commercially available, but the Documentary itself proclaims the rarity of the Concert Video. In any event, for someone who wishes to purchase an audiovisual recording of live performances of the Copyright Works by the Beatles, the Documentary may well be an acceptable substitute because it includes complete and uninterrupted performances of the Copyright Works together with additional material.
Secondly, there is the market for synchronisation licences of the Copyright Works more generally. Again, there is no evidence as to the extent of this market. What does appear from the evidence is that:
SATV UK has a sufficiently large synchronisation business to employ a Head of Synchronisation (and Marketing).
SATV have a standard template for synchronisation licences.
The “valued history and prestige” of the Beatles catalogue (as Ms Masters put it on 23 December 2009) was such that Ms Masters was able to demand a fee of £520,000 and Mr Hunt was prepared to pay that amount (subject to the slight adjustment to reflect the US rights position with regard to “Twist And Shout”). Moreover, Mr Hunt continued to be prepared to pay that amount after he decided to restrict exploitation to territories which did not confer performers’ rights (thereby ruling out the whole of the European Union, for example), and in particular the USA.
Mr Brodsky described the Copyright Works in his 30 April 2012 email as “some of [SATV’s] most valuable assets”. Given the well-known continuing popularity of the Beatles repertoire, this assessment is not surprising.
In these circumstances I consider that to allow this use of the Copyright Works on the ground of fair use would be likely to damage the market for synchronisation licences.
Overall assessment. Overall, I do not consider that the inclusion of the Copyright Works in the Documentary amounts to fair use. The Copyright Works are expressive works within the core of copyright protection; the use is a commercial one; the use is only partly transformative; the Copyright Works are reproduced in their entirety; the extent of the reproduction is excessive having regard to the transformative purpose; and to permit such use would be likely to damage the market for, or potential value of, the Copyright Works.
I would add that I think it is fairly plain from the correspondence in 2012 that Mr Hunt did not think that he did not need a licence, but rather was using Prof Jaszi’s opinion as a bargaining counter to try to reduce the price. For the avoidance of doubt, I should make it clear that I am not saying that the fact that Mr Hunt sought a licence negates a finding of fair use, since it is clear from the authorities that it does not: see e.g. Bill Graham v Dorling Kindersley.
Conclusion
For the reasons given above, I conclude that SATV succeed in their claims for infringement (or threatened infringement) of the UK and US copyrights in the Copyright Works.